World payments trends in 1989

• The US current account deficit fell to 2.1% of GNP in 1989,from 2.6% the previous year and 3.6% in 1987. Exports continued to grow rapidly, buoyed by strong overseas demand and a terms of trade gain resulting from the dollar's strength.
• The Japanese surplus fell to 2.0% of GNP in 1989 from 2.8% in 1988, as rapid domestic demand growth sustained buoyant growth in imports, and the terms of trade deteriorated.
• The German surplus expanded again in 1989, reaching 4.6% of GNP against 4.2% in 1988.
• The US current account deficit was more than matched by private sector capital inflows in 1989, providing support for the dollar. Japanese long-term capital outflows exceeded the current account surplus, but were partly offset by banking inflows resulting from heavy overseas corporate borrowing. • International capital market activity remained buoyant in 1989. Within this, banking flows recovered from 1988's depressed level while activity in bond markets continued to grow robustly. Foreign direct investment remained strong.

World payments trends in 1989